FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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At the end of the current year, the following information is available for both Pulaski Company and Scott Company.
 

  Pulaski Company Scott Company
Total assets $ 860,000   $ 440,000  
Total liabilities   360,000     240,000  
Total equity   500,000     200,000  
 

 
Required:
1. Compute the debt-to-equity ratios for both companies.
2. Which company has the riskier financing structure?

Complete this question by entering your answers in the tabs below.

  • Required 2

Compute the debt-to-equity ratios for both companies.

 
 
 
  Choose Numerator: / Choose Denominator:  
    /   Debt-to-Equity Ratio
Pulaski Company   /   =  
Scott Company   /   =  
 

 


 

Expert Solution
Check Mark
Step 1

Debt equity ratio =long term debt /equity

Lower the ratio, better it is

 

Note : In the question, no bifurcation given for liabilities, hence considered all is debt. Hence assumed total liabilities =debt

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